The Quilt Haus, Way to Sew and their owner have been sued by the U.S. Labor Department for failing to pay minimum wage to employees.

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Quilting and sewing supply retailers in New Braunfels are in a bind with the U.S. Department of Labor for allegedly paying some of their employees in gift cards to the stores.

Quilt Haus and Way to Sew even paid some workers with fabric, the federal government says in a lawsuit filed this week.

The Labor Department seeks unpaid wages and financial damages from the two businesses and their owner, Deanne Moore Quill, for allegedly violating federal minimum wage and overtime laws. She did not respond to a request for comment Wednesday.

The lawsuit identifies six employees who are due compensation from Quilt Haus and Way to Sew, though it doesn’t specify the amount owed.

According to the lawsuit, those employees are “deemed to be ‘volunteers’” and are paid in gift cards that can only be used in the two stores.

“The gift cards are valued by the Defendants at $8.00 per card and the volunteers are compensated with one gift card for each hour they work,” the government alleges. “The volunteers are then allowed to use the gift cards to make purchases in Defendants’ retail stores.”

The suit further notes that when making purchases, the volunteers are not sold items at the stores’ cost — what it pays wholesale distributors before mark-ups. Instead, they are given a 30-percent discount on regularly priced items and a 50 percent discount on clearance items.

The employees, who don’t receive monetary compensation, are paid with “‘in kind’ remuneration” that on some occasions includes fabric, the suit says.

“This is highly problematic,” Michael V. Galo Jr., a San Antonio employment lawyer who isn’t involved in the case, said of the businesses’ compensation practices. “You do see a lot of crazy things (by) employers who don’t follow the law … or don’t bother to research what they’re doing. This is some crazy idea these people came up with.”

Galo expects the businesses’ defense will be that the six individuals are not actual employees and, therefore, do not have to be paid at all.

The businesses have been violating the Federal Labor Standards Act of 1938 for almost two years, the Labor Department says in its suit.